SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
____
For the quarterly period ended September 30, 1995
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OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14870
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QUIPP, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-2306191
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 N.W. 157th Street, Hialeah, Florida 33014
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(Address of principal executive offices)
Registrant's telephone number, including area code (305) 623-8700
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares of the registrant's common stock, $.01 par value,
outstanding at October 31, 1995 was 1,609,465.<PAGE>
QUIPP, INC.
INDEX
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - September 30, 1995 and
December 31, 1994
Consolidated Statements of Operations - three and
nine months ended September 30, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity -
nine months ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows - nine months
ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
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<PAGE>
PART I - FINANCIAL INFORMATION
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
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(Unaudited) (Summarized from
audited financial
ASSETS statements)
Current Assets
Cash and cash equivalents $ 5,382,799 $ 8,782,624
Accounts receivable 6,095,279 2,621,229
Inventories 4,498,525 3,203,261
Other current assets 1,525,883 1,275,128
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Total current assets 17,502,486 15,882,242
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Property, plant and equipment, net 1,956,696 2,026,846
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Other assets 892,066 1,432,744
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$20,351,248 $ 19,341,832
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 2,489,416 $1,353,719
Other accrued liabilities 3,588,515 6,090,479
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Total current liabilities 6,973,030 7,444,198
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Long-term debt 1,950,000 1,350,000
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Total liabilities 8,027,931 8,794,198
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Stockholders' Equity
Common stock-par value $.01 per share;
authorized 3,000,000 shares, 1,678,165
and 1,538,165 shares issued and 1,609,465
and 1,469,465 shares outstanding 16,095 14,695
Additional paid-in capital 5,069,690 4,596,090
Retained earnings 7,532,932 5,932,249
Common stock subscribed 0 300,000
Less treasury stock 68,700 shares, (295,400) (295,400)
at cost ----------- -----------
Total stockholders' equity 12,323,317 10,547,634
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$20,351,248 19,341,832
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</TABLE>
See accompanying notes to the consolidated financial statements
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<S><C>
Three Months Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
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Sales $5,819,482 $4,715,914 $16,747,140 11,090,060
Cost of sales 3,846,689 3,168,663 11,259,344 7,366,382
----------- ----------- ----------- -----------
Gross profit 1,972,793 1,547,251 5,487,796 3,723,678
---------- ----------- ----------- -----------
Selling, general and
administrative expenses 1,076,500 880,475 3,027,412 2,644,386
Research and development 63,370 62,737 126,570 341,095
----------- ---------- ---------- ----------
1,139,870 943,212 3,153,982 2,985,481
----------- ---------- ---------- -----------
Operating income 832,923 604,039 2,333,814 738,197
Other income and expense, net 97,474 44,134 218,378 105,477
----------- ---------- ----------- -----------
Income before income taxes 930,397 648,173 2,552,192 843,674
Income taxes 400,509 237,200 951,509 310,708
----------- ---------- ----------- -----------
Net income $529,888 $410,973 $1,600,683 $532,966
=========== ========== =========== ===========
Net income per share $0.32 $0.27 $0.99 $0.35
=========== ========== =========== ===========
Weighted average number of
shares outstanding 1,631,017 1,526,530 1,624,040 1,526,782
=========== ========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
<S><C>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
------- ------ ---------- ---------
Balance, December 31, 1993 1,469,465 $14,695 $4,596,090 $4,556,043
Net income 532,966
--------- ------- --------- ----------
Balance, September 30, 1994 1,469,465 14,695 4,596,090 5,089,009
========= ====== ========= ==========
Balance, December 31, 1994 1,469,465 14,695 4,596,090 5,932,249
Net income 1,600,683
Issuance of Common
Stock Subscribed 40,000 400 299,600
Exercise of Stock<PAGE>
Options 100,000 1,000 174,000
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Balance, September 30, 1995 1,609,465 16,095 5,069,690 7,532,932
========= ======= ========= =========
Common Treasury Stock
Stock at Cost
Subscribed Shares Amount Total
----------- ------ ---------- ----------
Balance, December 31, 1993 68,700 $(295,400) $ 8,871,428
Net income 532,966
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Balance, September 30, 1994 -0- 68,700 $(295,400) $ 9,404,394
========= ====== ========= ===========
Balance, December 31, 1994 300,000 68,700 (295,400) 10,547,634
Net income 1,600,683
Issuance of Common
Stock Subscribed (300,000)
Exercise of Stock
Options 175,000
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Balance, September 30, 1995 -0- 68,700 (295,400) $12,323,317
========= ====== ========= ===========
</TABLE>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS*
(Unaudited)
Nine Months Ended September 30,
1995 1994
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Net cash provided by operation $1,600,683 ($122,826)
Cash inflows (outflows) from investment
in property, plant and equipment (1,462,953) (228,227)
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Increase (Decrease) in cash 137,730 (351,053)
Cash, at beginning of year 744,770 174,680
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Cash, at June 30 $882,500 ($176,373)
============ ===========
Supplemental disclosure of<PAGE>
cash payments made for:
Interest $ 40,465 $38,643
Income taxes $1,298,600 0
See accompanying notes to the consolidated financial statements
*Excluding current securities available for sale
QUIPP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein includes the accounts of Quipp, Inc.
and Quipp Systems, Inc. (a wholly-owned subsidiary) and is unaudited. The
accompanying consolidated financial statements have been prepared on a basis
consistent with that used as of and for the year ended December 31, 1994, in
conformity with generally accepted accounting principles (GAAP) and, in the
opinion of management, reflect all adjustments (principally consisting of normal
recurring accruals) necessary to present fairly the financial position of Quipp,
Inc. as of September 30, 1995, and the results of its operations, the changes in
its stockholders' equity and cash flows for the three and nine months ended
September 30, 1995 and 1994. All significant intercompany transactions have
been eliminated.
The results of operations for the three and nine month periods ended September
30, 1995 are not necessarily indicative of the results to be expected for the
full year of 1995.
NOTE 2: INVENTORIES
Inventories at September 30, 1995 have been recorded at the lower of cost or
market. Cost is determined using the first-in, first-out (FIFO) method. The
composition of inventories at September 30, 1995 and December 31, 1994 is as
follows:
September 30, December 31,
1995 1994
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Raw materials $2,446,397 $1,842,225
Work in process 1,640,946 1,140,590
Finished goods 411,182 220,446
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$4,498,525 $3,203,261
========== ==========
Inventories as of September 30, 1995 have increased as compared to those at
December 31, 1994 partly as a result of the purchase by the Company of
substantially all of the assets utilized by Hall Processing Systems in the
manufacture and design of stackers, conveyor systems, wrappers and other
related equipment (see further discussion of this transaction in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994).
NOTE 3: LITIGATION
On March 16, 1990, Ferag AG, a Swiss Corporation ("Ferag"), filed a complaint
against the Company in the Unites States District Court for the Southern
District of Florida. The complaint alleged that the Company committed acts of
infringement of one or more claims of two patents held by the plaintiff, either
directly, contributorily or by inducing others to infringe. The plaintiff
sought a preliminary and final injunction against further infringement by the
Company and certain related persons, an order directing the Company to account
for and pay damages adequate to compensate for the infringement of the patents,
interest and costs, and such other relief as the Court may deem just and proper.
The Company argued that plaintiff's patent is invalid due to violation of U.S.
patent rules, and separately that the Company's design does not infringe the
provision of the patent. On September 15, 1993, the Court found that the
Company infringed one of the patents held by the plaintiff, but that the
plaintiff failed to establish willful infringement by the Company. The Company
filed an appeal in the United States Court of appeals for the Federal Circuit.
On January 24, 1995, the United States Court of Appeals for the Federal Circuit
reversed the judgement against the Company. Thereafter, Ferag AG filed a
writ of certiorari with the United States Supreme Court. In October 1995,
the United States Supreme Court denied certiorari. As a result, the Court of
Appeals ruling in favor of the Company is final.
QUIPP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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THREE AND NINE MONTHS ENDED 1995 VS 1994
Sales for the three and nine months ended September 30, 1995, increased to
$5,819,482 and $16,747,140 compared to $4,715,914 and $11,090,060 for the
corresponding periods in 1994. Sales increased due to greater demand and
incremental sales from the Hall Acquisition (as described in Note 2 to the
Consolidated Financial Statements in Part I herein). For the three months ended
September 30, 1995, gross profit as a percentage of sales increased to 33.9%
from 32.8% for the three months ended September 30, 1994, principally due to
improved product mix. Gross profit as a percentage of sales for the nine months
ended September 30, 1995 decreased to 32.8% from 33.6% in the corresponding
period in 1994. This decrease was caused primarily by expenses relating to the
integration of the Hall Processing Systems products into the Company s
manufacturing process earlier this year.
Selling, general and administrative expenses for the three and nine months ended
September 30, 1995, increased to $1,076,500 and $3,027,412 , compared to
$880,475 and $2,644,386 for the corresponding periods in 1994. These increases
reflect the Company s increased sales volume and the impact of the amortization
of goodwill and other intangibles related to the Hall Acquisition.
Research and development expenses for the nine months ended September 30, 1995,
decreased to $126,570 compared to $341,095 for the nine months ended September
30, 1994. This decrease reflects less R&D activity as compared to the same
period of the previous year and the utilization of engineering resources to
accommodate increased sales. The Company hired two additional engineers and
has now added certain projects in the third quarter of 1995. Thus, the Company
anticipates that R&D expenditures will increase during the remainder of 1995.
General
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The Company's backlog as of October 31, 1995 was $7,218,487 as compared with to
$9,251,558 as of October 31, 1994. The Company expects to ship all of the
backlog within the next twelve months.
Liquidity
- ---------
The Company believes that its cash and cash equivalents of $5,382,799 on
September 30, 1995 are more than adequate to support the Company's operations at
its current level.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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As noted in the Company's Annual Report on Form 10-K, the Court of Appeals for
the Federal Circuit reversed the lower court judgement that the Company
infringed Ferag AG's patent, Ferag AG filed a writ of certiorari with the
Supreme Court. In October 1995, the United States Supreme Court denied
certiorari. As a result, the Court of Appeals ruling in favor of the Company is
final.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
Exh#
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this report
is being filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUIPP, INC.
Date: November 14, 1995 By: s\ Ralph M. Branca
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Ralph M. Branca
President and Chief Executive
Officer
By: s\ Louis D. Kipp
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Louis D. Kipp
Treasurer (Principal Financial
Officer) <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
this schedule contains summary financial information extracted from Quipp, inc's
september 30, 1995 form 10-q and is qualified in its entirety by reference to
such 10-q.
</LEGEND>
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<PERIOD-END> SEP-30-1995
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</TABLE>
